Winston Churchill once visited Uganda and dubbed it the Pearl of Africa. Amongst many other reasons, he coined this phrase because of the enormous economic potential that the country had and still has even today.
Uganda, much like its neighbouring countries in Kenya and Tanzania, is growing at a fast rate. Before COVID-19, the World Bank reported a 7.5% to 7.7% growth in 2019. During the same period, Uganda maintained low inflation rates of around 3.8% (Trade Economics).
If you are looking to have a slice of the lucrative pie that is the Pearl of Africa, here is a brief guide to help you invest in Uganda.
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Uganda: Economic Overview and Outlook
Before the outbreak of coronavirus early in 2020, Uganda had posted strong results in 2019. According to the African Development Bank Group, Uganda’s economy grew by 6.3% in 2019. This came in the wake of a re-galvanized service sector. These sectors include retail, telecommunications, and construction.
The country was able to achieve this while keeping inflation below 5%. However, the government increased its borrowing during this period by 20% to approx. 43% of the GDP. Of course, borrowing has gone up since COVID-19 happened, raising concerns in the long term.
Retail, telecommunications, and construction are sectors driving economic growth in Uganda. Should you choose to invest in Uganda, you should consider investing in any one of these sectors. However, other sectors, including oil, gas, mining, transport, and hospitality, are expected to grow exponentially in the Sub-Saharan state over the next decade.
One of the main reasons why you should consider investing in Uganda is the increased government spending. Uganda has committed to economic growth, which is evident in the increased spending on public infrastructure and capital investments.
Currently, the medium to long-term effects of COVID-19 have certainly rocked the country, but there are positives. Here are reasons why you should invest in Uganda in 2021.
5 Main Reasons Why You Should Invest In Uganda
Here are 5 main reasons why you should strongly consider investing in Uganda
Uganda Has a Lucrative Investment Climate
Investing in Uganda would prove worthwhile as the country has had a favorable investment climate characterized by the political and social stability witnessed in the country since 1986.
Not only that, but the country has had excellent policies, including those on foreign investment. Such policies have seen the country maintain an average of 6.5% when it comes to economic growth before COVID-19.
According to the State, investment on return is projected to increase from 5% to 7% over the next few years. This figure is relatively higher than some European and Asian states, whose rate of return by investor stands at 4.5%. So, investing in Uganda could prove to be profitable.
Other notable factors that make Uganda a country worth investing in include;
- An abundance of natural resources
- A liberalized foreign exchange system
- A vast, trainable, and welcoming labor force
- Dedicated courts for business disputes.
Foreign Market Access through Agreements and Other Trade Treaties
Investing in Uganda is worth it as the country has positioned itself to become an essential member of various trade groups, including COMESA, the EAC, and SADC, just to mention a few.
Take COMESA (Common Market for Eastern and Southern Africa), for example, a trade treaty that gives the Sub Saharan country access to a market of over 400 million people spread across 19 countries. Trade in such regions is free, reaffirming the claim to invest in Uganda.
Growth of the Economic and Social Infrastructure
You should consider investing in Uganda because of the rapid development of the country’s economic and social infrastructure. For instance, the government allows free 100% foreign ownership of private investments.
Such measures are great for attracting FDIs to the country who contribute significantly to the country’s GDP. What this means for you as an investor in Uganda is that you’ll find it easy and profitable to conduct business in such a region.
To create a conducive environment, the Government of Uganda created a One Stop Center (OSC) that handles all business-related issues, including registration and licensing through the Uganda Investment Authority (UIA).
Not only that, but this center also helps clients with queries regarding tax, advice, work permits, registration, land acquisition, and immigration, just to mention a few. For this reason, you will find it easy to carry out business and invest in Uganda
However, it is worth mentioning that the country only allows FDI investment from foreigners with a minimum security of $100,000.
Increased Government Spending
The Government of Uganda has made substantial efforts to attract foreign investment, including increasing its spending. As mentioned above, the government has taken steps to ensure high standards of administrative and regulatory processes are maintained.
Favorable Industrial Policies Including Subsidies and Incentives
Here are some incentives and subsidies available for investors in Uganda;
- Income Tax. There are ‘tax holidays’ on finished consumer or capital good exports for no more than ten years
- Depreciation Rates
- Zero Value Added Tax on certain goods and supplies
- Withholding tax on the importation of certain capital goods or raw materials, including plant and machinery.
- Subsidized depreciation rates.
The Most Profitable Sectors and Industries to Invest in Uganda
Construction
Building and construction is the fastest growing sector in Uganda. Remember, the state is a third-world country with a wildly ambitious government. The result is a ton of construction projects both in the public and private sectors.
Construction accounts for approximately 12% of Uganda’s gross domestic product (GDP). Opportunity for foreigners looking to invest in Uganda lies with affordable housing projects in urban and semi-urban areas. According to a report, Uganda suffers a massive housing shortage which has seen the country lack over 6.1 million units.
To encourage foreign and domestic investments, the government had availed over 30 incentives and subsidies
Telecommunications
Uganda is a landlocked country, home to approx. Thirty-five million people, 10 million of whom have mobile phone subscriptions. However, Uganda’s telecommunications sector in Uganda is quickly growing.
According to a survey, the country was able to garner over 1.3 million subscribers between 2008 and 2009. Before 2007, the country’s telecommunication avenues were closed with the government providing such services. But since then, the country is open to all for competition. Major telecommunications in Uganda include MTN, Orange, and Warid Telecom.
Business opportunities here include providing ISP (internet service provider) services to all areas, especially the countryside. Another business opportunity includes providing affordable cable services to a country still making the slow switch over from analog receivers to digital receivers.
Retail
The retail trade industry contributed to approx. 18% of Uganda’s GDP in the past decade. This comes in the wake of consistent improvements to the county’s infrastructure.
As the country recovers from COVID-19, analysts and key predictors estimate a 4.2% increase in consumer spending. Not only that, but since 2011 the country has increased its per capita spending on the grocery. The opportunity here lies with opening domestic retailers in Kampala and Entebbe.
Transport
Transport services in Uganda include rail, road, water, and air. This sector contributes to approx. 2.5% of the country’s total GDP. There are many incentives to encourage investments in the transport industry.
For investors, the real opportunity lies with;
- The development of a water transport infrastructure system
- Investing in Uganda’s water leisure and entertainment vessels.
- Improving air transportation service
- Partnering with the government to construct roads and other infrastructure.
Agri-Business
Just like its neighboring states in Kenya and Tanzania, Uganda is among the leading producers of coffee and bananas in the world. Not only that, but investing in Uganda, particularly the agri-business, means that you will be exposed to major markets demanding tea, cotton, cereals, and fresh fruit, just to mention a few.
You should consider investing in Uganda, especially the agribusiness sector, because the country has been categorized as one possessing agricultural land for sale. Furthermore, there are several subsidies present in this sector as it accounts for 50% of the country’s exports.
Investing in Uganda will prove worthwhile as the country has favorable weather conditions matched with incentives and subsidies from an ambitious government.
Tourism
Another reason why investors should consider investing in Uganda is because of its rapidly growing tourism sector. Tourism in Uganda accounts for approximately 7.75% of the country’s GDP. Europe is the leading market for Uganda’s tourism products and services.
The Pearl of Africa is home to the longest river in the world. Not only that, but its thick mountain covers provide shelter to over 50% of the world’s gorilla. It doesn’t stop there. Uganda is a top tourist destination because of its tree-climbing lions, White rhinos, birds, elephants, mountains, preserved forests, and natural attractions.
Possible investment ideas include resorts and hotels, wildlife lodges, the establishment of tourism and hospitality training institutes, just to mention a few. Opportunities lie with accommodation facilities and travel tours to take advantage of rafting in the River Nile, safaris, mountain climbing, and bicycle riding, just to mention a few.
However good the country’s tourism sector might be, it is still miles behind compared to other tourism sectors. For this reason, you should strongly consider investing in the country as the need for international tourist standards keeps growing in the country.
Challenges Faced by Investors in Uganda
Here are some challenges that investors face while investing in Uganda.
High Corruption Levels
Unfortunately, investing in Uganda means dealing with corruption at the highest and lowest levels. Uganda is characterized by widespread ‘petty corruption’ involving officials in the government. Not only that, but high-ranking public officials are also involved in what is termed by the authorities as Elite corruption.
Recently, corruption has been seen in public procurement because of the lack of transparency in government dealings. What this means for you as an investor in Uganda is that the cost of doing business is significantly higher as due to bribes and petty corruption.
Relatively Unskilled Labor
Although Uganda has a relatively high literacy level (73%), the country still lacks the education level necessary to hold the available jobs. According to the International Labor Organization, ILO, 73% of all Ugandan workers lacked the necessary education to perform the current jobs available.
So as an investor, you will struggle to nail down top talent in Uganda. However, by employing HR staffing and consulting firms such as Flexi Personnel, you will be increasing your odds of attracting and retaining top talent.
Poor Government Services
To match the high corruption levels in the country, access to government or legal services remains a challenge. Poor IT infrastructure in the IT and construction sectors have left the country with poor access to government services.
Poor Infrastructure
Uganda remains a third-world country despite the efforts of the government. Kampala and Entebbe are fairly developed, but other regions especially the countryside, remain significantly underdeveloped.
Poor roads, lack of access to clean water and sanitary systems define the infrastructure state in the country. What this means for you as an investor in Uganda is increased costs of doing business.
Are You Looking to Invest in Uganda?
Investing in a foreign country has several challenges. For instance, many businesses report language and cultural barriers. These barriers could prevent a company from carrying out organizational functions such as staffing and recruiting. Not only that, but such barriers might prevent your organization’s ability to remain profitable, especially during COVID-19.
For such reasons, it would be in your best interest to consider employing the services of a HR management firm. Not only do such firms have experience doing business in the region, but they also have access to top talent and skilled individuals in the region.
Flexi Personnel is one of the leading providers of Human resource management solutions in Africa, including Uganda. We have worked with internationally recognized brands. Furthermore, we have amassed an extensive database of highly skilled individuals over the decade that we’ve been operational.
We would like to work with you on your next project as you invest in Uganda. Contact us today at Flexi Personnel for this and more HR management solutions.
